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Spending on health and hospitals includes spending on community and public health programs, government-owned hospitals, and government payments to privately owned hospitals.¹ 

Census counts most state and local spending on Medicaid as public welfare, but it includes some Medicaid spending under the health and hospital expenditure category.

• How much do state and local governments spend on health and hospitals?
• How does state spending differ from local spending and what does the federal government contribute?
• How much do hospital charges contribute to health and hospital spending?
• How has health and hospital spending changed over time?
• How and why does spending differ across states?

How much do state and local governments spend on health and hospitals?

In 2020, state and local governments spent $345 billion on health and hospitals, or 10 percent of direct general spending.² As a share of direct general state and local spending, health and hospitals was the third-largest expenditure in 2020.

In 2020, 65 percent of health and hospital spending went to hospital services and 35 percent went to other health programs.

Hospital services include the operation of university medical schools, state-owned hospitals for people with mental illness or disabilities, public children’s hospitals, and payments to private hospitals for public services. Census counts payments to public providers, such as Medicaid, as public welfare expenditures, but counts Medicaid payments to hospitals as health and hospital expenditures. The Medicaid and CHIP Payment Access Commission estimates that payments to hospitals accounted for 11 percent of total Medicaid spending.

Health program expenditures include services such as mental health and substance abuse programs, county health department inspections, water and air quality regulation, and health inspections.

In 2020, 97 percent of health and hospital expenditures were for operational costs, such as public health administration, community health programs, public hospital operations, and regulatory services. The remaining 3 percent went to capital outlays such as hospital construction.

How does state spending differ from local spending and what does the federal government contribute?

Spending on health and hospitals is split roughly evenly between state and local governments. In 2020, states provided 46 percent of health and hospital spending while local governments provided 54 percent.

State and local governments also spent the same share of their budgets (10 percent) directly on health and hospitals in 2020. Among levels of local governments in 2017 (the most recent year that we have data for these levels of government), spending on health and hospitals accounted for the largest share of county budgets (20 percent) and special district budgets (36 percent). Special districts are typically dedicated to one or a few services, so the relatively high percentage of national special district spending on health and hospitals reflects that a large number of special districts across the country are solely dedicated to health and hospital services.

However, the level of government directly spending on health and hospital expenditures varies greatly across states. In Indiana, for example, only 13 percent of direct health and hospital spending occurred at the state level in 2020. In contrast, in Vermont, the state government was responsible for 98 percent of total direct health and hospital spending.

In 2020, 66 percent of health and hospital spending ($228 billion) was funded by state and local governments, while the federal government provided 34 percent ($117 billion). The federal government’s response to the COVID-19 pandemic significantly increased the federal government’s share of state and local health and hospital spending in 2020. In 2019, the federal government funded only 9 percent of this spending. Specifically, the CARES Act, passed in March 2020, provided over $170 billion to compensate hospitals and health care providers for unanticipated costs during the pandemic. These funds, plus additional funds provided by the American Rescue Plan (2021), could keep the federal share of state and local spending  on health and hospitals relatively high for the next few years.

How much do hospital charges contribute to health and hospital spending?

The Census data on health and hospital expenditures include revenue from both governments and charges related to health and hospitals, such as when a public hospital charges patients, private insurance companies, and public insurance programs (such as Medicare) for care or other services (e.g., cafeteria food purchases) plus services such as the care and treatment of the handicapped.

The share of state and local health and hospital spending from charges has grown considerably over the past 40-plus years. In 1977, charges accounted for 37 percent of state and local health and hospital expenditures. But since 2011, charges have accounted for a majority of this funding. Charges were 54 percent of state and local health and hospital expenditures in 2020.

How has health and hospital spending changed over time?

In 2020 inflation-adjusted dollars, state and local government spending on health and hospitals increased from $98 billion in 1977 to $345 billion in 2020, an increase of 251 percent. Much of this spending increase was driven by the rising costs of health care and the related increase in charges as a share of state and local spending on health and hospitals. Notably, the growth in health and hospital expenditures roughly tracked the growth for non-health and hospital expenditures until 2006, but since then the former has seen far more spending growth than the latter.

For the same reason, public welfare expenditures had the fasted growth (437 percent) from 1977 to 2020 because much of its growth was driven by higher Medicaid spending. However, Medicaid spending, which Census counts as either public welfare or health and hospital spending, grew in large part because of increased federal spending on the program. (For more information on spending growth see our state and local expenditures page.)

Still, despite the spending growth, health and hospital spending as a share of state and local direct general expenditures has not changed significantly over the period. In 1977, 8 percent of state and local spending went to health and hospitals compared with 10 percent in 2020.

How and why does spending differ across states?

Across the US, state and local governments spent $1,041 per capita on health and hospitals in 2020. Wyoming spent the most on health and hospitals at $2,961 per capita, followed by South Carolina ($1,818), North Carolina ($1,688), California ($1,672), and Alabama ($1,652). New Hampshire spent the least per capita at $163, followed by Arizona ($281), North Dakota ($348), Maine ($360), and South Dakota ($377).

Data: View and download each state's per capita spending by spending category

Health and hospital spending may vary by state for many reasons, including higher utilization of health services or hospital readmission rates among some populations; higher regional health care costs; the number of government-owned hospital beds; or other factors that may require additional investment in public health services to address, such as pollution or mental health and substance abuse problems.

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What everyone should know about their state’s budget

Further Reading

3 .7 Million People Would Gain Health Coverage in 2023 If the Remaining 12 States Were to Expand Medicaid Eligibility
Matthew Buettgens and Urmi Ramchandani (2022)

Health of the States: How U.S. States Compare in Health Status and the Factors that Shape Health
Steven H. Woolf, Laudan Y. Aron, Derek Chapman, Lisa Dubay, Emily Zimmerman, Lauren C. Snellings, Lindsey Hall, Amber D. Haley, Nikhil Holla, Christopher Lowenstein, and Timothy A. Waidmann (2016)

Assessing Fiscal Capacities of States: A Representative Revenue System–Representative Expenditure System Approach, Fiscal Year 2012
Tracy Gordon, Richard Auxier, and John Iselin (2016)

Research Areas State and local finance

Policy Centers Urban-Brookings Tax Policy Center